All About India's First Mortgage Guarantee Company
A large number of home buyers are dependent on loans to fulfil their dream. But, even then, one must save a substantial amount to – generally 20 per cent of the total worth of a house – to initiate the purchase. However, this may change if India Mortgage Guarantee Corporation (IMGC) is able to convince the central bank to execute certain policy changes.
Here are a few things you need to know about the mortgage guarantor:
- The company is the first-of-its-kind to provide a mortgage guarantee in India. The company site describes it as: "mortgage guarantee is a financial product which compensates lending institutions or housing finance companies for losses that may arise when a home owner defaults on a mortgage loan". By providing mortgage guarantee, the IMGC aims to “mitigate risk taken by lenders, banks and housing finance companies”, apart from “making it easier for people to get access to home loans of higher values earlier in life than would have been possible without IMGC's involvement".
- IMGC is a joint venture by National Housing Bank (NHB), Asian Development Bank (ADB), International Finance Corporation and Genworth Financial. While the NHB owns the majority stake of 38 per cent in the entity, Genworth Financial holds 36 per cent. ADB and International Finance Corporation hold 13 per cent stake each.
- The company started its operations in 2013, and has provided credit guarantee to the tune of Rs 800 crore so far. The number is expected to touch Rs 1,000 crore in the coming 12 months as IMGC brings on board more partners. The company is now eyeing to make public-sector lenders its partners. Currently, the mortgage insurer has tie-ups with private lenders such as ICICI Bank, Diwan Housing Finance, Reliance Home Finance, Aditya Birla Housing Finance and Fine Home.
- The AA-rated company is urging the Reserve Bank of India (RBI) to bring down the loan-to-value (LTV) ratio to 90 per cent. If that happens, home buyers will be able to invest in a property only with 10 per cent of the total cost; banks will cover the remaining value as loans. As it stands today, a borrower gets 75 percent LTV loan, and has to organise 25 per cent down-payment to make a purchase of a home worth Rs 20 lakh.
- "We are in talks with the RBI for allowing the LTV to go up to 90 per cent so long as there is a mortgage guarantee along with the loan product ... What we are saying to the RBI is advance home ownership. If today I can get away with putting 10 per cent down for a home loan, more people will come into the fold, which is what the government is trying to do,” IMGC Chief Executive Officer Amitava Mehra told Business Line.